Panic of 1857

The third crisis of Buchanan’s first half year in office, a financial crisis, broke in August 1857. It was brought on by a reduction in demand for American grain caused by the end of the Crimean War (1854-1856), a surge in manufacturing that outran the growth of markets, and the continued weakness and confusion of the state banknote system. Failure of the Ohio Life Insurance and Trust Company on August 24, 1857, precipitated the panic, which was followed by a depression from which the country did not emerge until 1859.

Everything in those years seemed to get drawn into the vortex of sectional conflict, and business troubles were no exception. Northern businessmen tended to blame the depression on the Democratic Tariff of 1857, which had set rates on imports at their lowest level since 1816. The agricultural South weathered the crisis better than the North. Cotton prices fell, but slowly, and world markets for cotton quickly recovered. The result was an exalted notion of King Cottons’ importance to the world, an apparent confirmation of the growing argument that the southern system was superior to the free-labor of the North.